Dear ladies and gentlemen, welcome to the earnings call of Nemetschek Group. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. I now hand you over to Stefanie Zimmermann who will lead you through the conference. Please go ahead.
Thank you, operator, and hello, everyone and a big welcome. Thanks for joining our earnings call today to discuss the results for the second quarter of 2022 with us. With me today are our CEO, Yves Padrines, and our CFOO, Axel Kaufmann. Today's conference call is being recorded. A replay of the call will be available at our website after the call. Additionally, you will find the report, the presentation, and the press release on our investor relations website as well. Now let's get started. I would like to turn over to Yves. Go ahead, Yves.
Thank you, Stefanie, and welcome everyone to our Q2 and H1 2022 earnings call. We have prepared our usual brief and informative slide deck that our CFOO, Axel Kaufmann, and I would like to briefly walk you through so that we have enough time for your questions afterwards. As usual, we start with a short overview of last quarter financial highlights, in this case, Q2 on page three. After an outstanding start to the year, we continued with our strong double digit and profitable growth in the second quarter. Customers along the entire life cycle of buildings rely on our innovative and collaborative solution as well as on our expertise to support them in their digitalization strategy. With an increase of nearly 23%, we reach a new quarterly high in revenue with EUR 204 million.
In line with the last quarters, we again enjoy a substantial FX tailwind, mainly coming from the strong US dollar. The main growth driver continued to be the recurring part of our business, in particular on subscription and SaaS offerings, with a +56% and still 48% on a currency-adjusted basis in Q2. Our subscription and SaaS revenue reached a new high of EUR 47 million. As announced previously, following the COVID lockdown in Q1, we were finally able to ramp up our travel and trade fair activities again. However, despite these increased investments, we were able to maintain our EBITDA margin at a very high level of 33.6%. Our substantial growth, combined with a high efficiency, culminates in earnings per share of €0.40, a significant year-over-year increase of 40%.
With this, let's look at the summary of our key financial highlights for the first six months of the year on slide number foufive. It shows a very similar picture. Strong currency adjusted growth of almost 17%, mainly driven by our recurring revenues and combined with our overall proportionally earnings growth at record high margins. Along with a substantial tailwind, we were able to achieve revenue of EUR 396 million, a year-over-year increase of 22% in H1. Within the recurring revenue category, our subscription and SaaS business again accounted for the majority of the growth, and Axel will talk you through the details here shortly. Last but not least, we have also further improved the quality of our balance sheets once again. Therefore, our strong operational results, along with our extremely solid balance sheet, provide us with a substantial financial firepower.
This should value-generating M&A and venture investment opportunities rise up in the coming months and quarters. On page five, I would like to share an overview of the value strategic highlights in the first half of the year 2022 in each of our three strategic focus areas. First, innovation and technological leadership, which have always been a core part of the Nemetschek Group D&A. We continue to solidify our position as an innovative leader on various fronts. For example, with introduction of our new Bluebeam Cloud offering, which we already announced that we were planning to launch, this month in July. That is done. By now, we already have many different cloud features and solutions across our portfolio. For example, in the design segment, Bimplus, with Allplan or Solibri or BIMcloud with Archicad.
In our build segment with d.3ecoplus also and 123onsite from NEVARIS and in the management segment with Spacewell and Dexma. Apart from our AI initiatives, we continue to drive our digital twin strategy, where we stand for an open and data-first approach. In the media segment, we were one of the founding members of the Metaverse Standards Forum. You may have seen that in the press, but the Metaverse Standards Forum has been funded by us, but alongside all the global players such as Adobe, Epic Games, Meta, Microsoft and NVIDIA. Our common goal here is to help build an open metaverse. Second, an update on our venture investment and M&A strategy. After the three minority investments in young and highly innovative company we already did, we invested in SymTerra.
This startup is based in the U.K., and they offer a site communication platform that facilitates communication, collaboration, and visibility across the supply chain in construction. Our clear objective is to continue and even further accelerate this approach in the future. In parallel, we were also successful in the traditional M&A field with Maxon acquisition of Pixologic, important part of our strategy, and we talked about that in our last quarter with introduction of ZBrush in the Maxon One solution, as well as a strengthening of our design segment with DC-Software, which is a pure technology acquisition, which expands our competence in foundation engineering. Last but not least, our effort in the field of operational excellence.
Apart from the continuous progress we made in H1 on various harmonization and integration initiatives across the group, we also set up the Engineering Alliance Europe, where our brand SCIA, FRILO, and the newly acquired DC-Software combine their forces. In addition, we often talk about the close relationship we have with our customers. This is an integral part of Nemetschek success and one of our main strengths. Due to the global COVID-19 pandemic, we had to pivot our approach to a more virtual one over the last two years affecting all of us. However, no matter how well organized and executed such virtual events or meetings are, they are not a substitute to a real physical meeting where you can sit down with your customers, do demos, and talk to them face-to-face.
Therefore, we were very happy, and we are very happy that we were finally able to participate again in person in industry-first, such as leading events we had in the U.S., in U.K., in France and Germany. In addition, we also had several brands events with a lot of people, again, coming back in person on site to visit our companies or brands and see the different demos and innovations. We are convinced that only a combination of both virtual events as well as in-person meetings will help us keep the close relationship with our current customers and simultaneously attract new ones. With that, I will now hand over to Axel, who will go deeper into important aspects of our financial results.
Thank you very much, Yves, and a warm welcome to our second quarter earnings call also from my side. On this page number six, you'll find the development of our four segments during the first six months of the year. Starting on the left side in our largest segment, design, where we address architects, engineers, as well as structural engineers, as Yves was saying, we were able to achieve a slight acceleration in growth in the second quarter over the first quarter. For the entire first half of the year, we achieved a reported increase of 11.5% and a currency adjusted plus of 8.4%. What is especially important and we're proud of, we were able to expand our already high level of profitability once again by another 80 basis points.
We're very pleased to see that the very strong growth in our subscription and SaaS revenues of nearly 60%, a clear confirmation that the segment's hybrid strategy to offer both subscription and licenses to its customers is working very well. In the build segment, which mainly targets construction companies in the U.S., parts of Asia, and the German-speaking countries in Europe, our brand Bluebeam was once again the main growth driver, supported by its increased focus on small and medium businesses, a new web store, as well as its successful internationalization strategy. For the segment, this translated to a significant growth of 33.5% on a reported basis and still almost 25% at constant currencies while the profitability stayed on a record level.
We're happy to also announce and confirm, as Yves was saying, that Bluebeam's long-awaited subscriptions transition has begun at the beginning of the third quarter in line with our plans. Yves will provide an update and more details regarding the transition later. Our media segment had a stellar first half of the year in terms of growth, 60% year-over-year, along with a massive margin expansion of 850 basis points to over 43%. Similar to the past quarters, we're now harvesting the fruits of Maxon's fundamental transformation over the last years to having become one of the leading players in the 3D animation industry. This move was further accelerated by the acquisition of Pixologic and its award-winning product, ZBrush, which once again an improvement of our flagship product, Maxon One.
In the Manage segment, last but not least, which accounts only for 6% of group revenues, we saw a continuous cautious investment behavior for some of our customers. While we're not satisfied with the operational performance of this segment, we were still and are convinced of the strategic rationale. We're working hard to improve the situation, and we continue to strongly believe that the promising long-term growth potential for this segment in, for example, smart building and energy solutions and contributing to initiatives such as the mentioned digital twin remain unchanged. Coming to one of the most anticipated overviews of our presentation, we prepared it on page number six, seven. Yves already briefly touched on the development of our recurring revenues as one of our main growth drivers previously.
Taking a closer look now at the different components of our recurring revenue growth, it becomes clear that our segment tailored subscription strategy is particularly successful with a growth of almost 60% in the first half of this year. Furthermore, drilling a little bit deeper into the historic development of our recurring revenue category, you see that we were able to almost triple our share of subscription and SaaS revenues from 8% in 2019 to 23% as of today. Along with our maintenance contracts, if we add them, we were able to once again gradually increase our recurring share to a new record high of 63%. With the beginning of the subscription transition in our biggest brand, Bluebeam now, the development of the recurring part of the business will become even more important in the future.
This is also why we will start to report the de facto industry standard subscription KPI, ARR, with our third quarter reporting in October. As usual, we provide an overview of our most important P&L balance sheet and cash flow positions on this page number 8. We already addressed our most important KPIs, which is revenue and EBITDA in detail previously, because we're now going further down the P&L, and you'll notice that our EBIT and earnings per share increased over proportionally during the first six months of the year. This was mainly a function of two factors. First, only a moderate increase in depreciation and amortization charges, including PPA, as well as second, a better tax management, which led to a tax rate of just 19.2% in the first six months of the year.
Our strong earnings growth and the increased internal efficiency are reflected throughout the entire income statement, which cumulates to a 42% increase at the earnings per share level. In addition, our high free cash flow of EUR 106 million underpins the high quality of our earnings. Last but not least, we once again improved the healthiness of our balance sheet, represented in important metrics such as the equity ratio, which increased to a record level of 53%, as well as our net cash position of EUR 70 million. With that, let me hand back to Yves.
Thank you, Axel. Before we come to the end of our presentation with the outlook for the financial year 2022, let me give you a short update regarding the subscription transition of our brand Bluebeam. In short, even though we are only a few weeks into the transition, everything is developing as planned and the customer feedback is positive. Slide 10 gives a detailed overview of our strategy as well as a roadmap for the roll-out of subscription at Bluebeam in Q3. We have two major priorities going into the transition. Firstly, our goal is to ensure that the customer experience during the transition is as positive as possible for the small and mid-sized business, up to the largest multinational enterprise accounts.
For this purpose, we have designed a detailed phased global launch, which was kicked off in July with introduction of our subscription offering to our largest directly managed accounts. In the middle of the quarter, we will then take a step further and address all directly managed existing customers, followed by the indirect route to market. Lastly, at the end of the quarter, so end of Q3, we have a global launch across all Bluebeam websites and web stores. In addition, and that is in contrast to some of our competition, we are adding value to our subscription offering by including aspects of the new Bluebeam Cloud to a flagship desktop product, Bluebeam Revu, in the different product tiers. Secondly, we also want to make the subscription transition for you, our shareholders, as digestible as possible.
That's why our multi-level subscription strategy is not only based on a phasing of the Bluebeam transition, but we also carefully choreograph which brands will transition when across our group portfolio. The initial feedback from our customers fully confirm our strategy so far. They love the high degree of flexibility due to the new cloud and data centric model, and are planning to roll out our solution through the remainder of the year. Also, the first discussions with our retailers are very promising and confirm that we should proceed with our plan. We will provide additional information and updates in the coming quarterly reporting so that you can track the progress of the transition. Now, as we come to the end of our presentation, I would like to turn toward 2022 outlook on page 11. We fully confirm our guidance for the financial year 2022.
In particular, this means that from today's perspective, we expect a revenue growth at constant currencies in the range of 12%-14% and a target of EBITDA margin between 32%-33%. Why do we continue to be confident we will reach our full year targets? Please allow me to highlight only the most important points.
First of all, our strong operational performance in the first two quarters of the year show that there is continued high demand for innovative software solution and that all of our underlying secular growth driver in both our industries, such as the low degree of digitalization and the ever-increasing demand of digital content are fully intact. Secondly, our various optimization initiatives, investment in the highly innovative startup as well as product development show that it is Nemetschek Group ambition to not just participate in this market, but to continue to be a market leader and to shape the industry. Lastly, our business has become much more resilient and better plannable over the last years with a rising share of recurring revenues. This trend will even accelerate with the next few quarters and years with the start of Bluebeam's subscription foundation.
We therefore continue to be optimistic and expect an attractive growth along with a high profitability in 2022. With that said, I would like to thank you for your attention, and we are now happy to take your questions. Operator, please back to you.
Thank you. Now we will begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your questions answered before it is your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please test the handset before making your selection. One moment please for the first question. The first question is from George Webb of Morgan Stanley. Your line is now open.
Hi, good afternoon, Yves and Axel. I've got a couple of questions to kick off with. The first is on growth in the design segment in Q2. If I recall back at the end of Q1, the expectation was that growth would accelerate over the coming quarters from that lower 8% constant currency. You talked about clearly better exit rates in March versus the rest of Q1. Now looking at Q2, that acceleration has come through, but it was only kind of 90 basis points, which feels a little bit light. I'm wondering if you can talk through what you saw in design as you moved through Q2 and how demand there is evolving.
When you look through the rest of the year with the uncertain macro, are you still expecting design to pick up from here? Secondly, just on costs. The cost-based growth seems to be coming through now and head count growth has started to pick up from low levels. If there is to be a tougher macro, more maybe as we enter 2023, how do you view the leanness of your cost base? Is there investment in hiring you're going to need to do regardless of whether there is overall demand patterns that start to slow, or would you be willing to slow cost growth again if a weaker demand pattern did emerge? Thank you.
Thank you, George. I will take your first questions. Growth on the design division for Q2. Clearly, as we mentioned, we've seen some acceleration and you acknowledge that of growth in Q2 versus Q1. I think here there has been a higher than expected growth in subscription and sales than what we expected, which is good. Good in terms of where we want to go on the fact our strategy to accelerate our subscription revenue. Obviously it has had an impact on the perpetual revenue side, this acceleration and higher than expected growth in subscription and SaaS in our design segment. Of course, there has been weakness in pockets of growth in some European countries, clearly due to, probably, the Ukrainian-Russian war and some other macro elements.
This has been really in some small pockets, especially if you look at Finland, for example, or some countries adjacent to Russia. As you know, Russia, we are not doing any business since you know, we announced it earlier this year, like most of the Western companies in any industries. Of course it had also some impact. But in general, you know, some of the large markets in Europe, we are still seeing some good growth with the large market in Europe. It's just in some pockets that it has been a little bit weaker than expected. Still very nice growth, especially in U.S. and also internationally outside Europe on the design segment.
Just to add on what Yves was saying, George, thank you very much for the second part of the question regarding cost. You know, we look at the income statement, you're right. Most of that really was driven by investment, as you were saying. We were planning to increase staff certainly at a slightly higher wage inflation partially as well, given the also footprint of the resources that we would have in the U.S. market, for example. But we're also, you know, investing in new developing topics, initiatives, and then also functions just to prepare the company for further growth. I think it wasn't at a level where we consider it unhealthy or not under control.
Think of travel and trade fair, you know, activities going towards customers. This is something we do by intent, and we consider this good for the business mid and long term certainly. It helps us to reach out to existing customers and also to win new customers. Last but not least, if you think about the margin and overall, we did have some base effects also in the second quarter of last year. Just think about the media division, which in this first quarter was boosted by a very strong license sale in China. Overall to your-
A question, yes, of course, the company is, has been shown and proven, I think, to very carefully and conservatively manage the cost overall. Looking at the income statements, you know, the several sources where this is coming from, such as personnel, infrastructure costs, or D&A, from CapEx. Yes, we are prepared to carefully monitor and potentially pivot our plans there because those are all things that we have well under control.
Great. Thank you very much.
The next question is from Sven Merkt of Barclays. Your line is now open.
Great, good afternoon. Thanks for taking my questions. Maybe first on Bluebeam performance, was clearly again very strong. I was just wondering to what extent was this simply driven by still very strong demand and to what extent have customers brought orders forward ahead of the cloud transitions? Maybe secondly, given the phased approach you're taking in moving Bluebeam to SaaS, could you maybe quantify the impact on Group growth for Q3, Q4, and maybe also next year? Thank you.
Thank you, Sven. So clearly, Bluebeam, we had a record high of new users and new customers this quarter. This is definitely not coming because of the move to subscription. It is really we see this high demand and this very good performance. So here very strong momentum. I think if you look at Bluebeam's subscription transition, clearly as described, we started this transition earlier this month, especially with a large customer. As explained, we are doing that in a phased approach until the end of the quarter. Therefore, the real impact on Bluebeam's revenue because of this transition will only come in Q4 and beyond. Yeah. Absolutely. Thanks, Sven, also Axel here.
I think just to confirm, I mean, as usual, you know us for not really giving guidance on just a single quarter, and the tendency is exactly like Yves was outlining.
Okay, fair enough. Maybe as a follow-up, given that the margins are clearly normalizing, with the return of travel and event costs, to what extent have these events given you a boost to growth in the quarter that might have offset some of the emerging macro weakness?
Tough question. The question is that if trade shows helped on short-term sales. If we have seen that already in the numbers. Well, I think, you know, trade shows, it's not necessarily where, you know, you book deals when you visit a customer. It's not this type of trade shows. It's not like it's mainly trade shows to really present the roadmaps, the innovation, do demos. Of course, still this will influence seriously decision on sale. Of course, some deal were closed in trade shows. I'm not saying that none were not closed, but it's not like, you know, you're in a B2C trade fair, very different obviously in B2B.
You know, I would not say it is because of trade shows that we had a strong quarter.
Okay.
That's going to help us for the future, obviously.
Okay, great. That's clear.
The next question is from Nay Soe Naing of Berenberg. Your line is now open.
Hi, good afternoon, everyone. Thank you for taking my questions. Two questions if I may, starting with the one on Bluebeam transition. Just wanna clarify something about what you'd mentioned with regards to the cloud capabilities that are offered as part of a subscription transition. Do you offer it as part of the overall transition move to subscription or these cloud capabilities are offered at an additional cost? Secondly, if you are able to share, are there any incentive programs for the existing customers to switch to subscription?
Yeah. Clearly, Bluebeam Cloud is part of our subscription strategy. You can only have Bluebeam Cloud with a subscription package. In Bluebeam Cloud, you have different type of features. You know, there will be different subscription packaging in Bluebeam. You will have, you know, a basic package, a core package, and if you want like the premium complete package. Already in the basic package, there will be Bluebeam Cloud Collaboration, for example, which is the new basic if you want cloud collaboration features for web and mobile. Then if you move to core, there will be additional cloud features such as workflow management, geolocation insights and more things.
Of course, when you move to the even more complete type of feature set. You add new cloud solution, but the message is that as soon as you move to subscription, you de facto get the basic Bluebeam Cloud collaboration features for web and mobile.
That's really helpful. Thank you very much. On the second question, if you are able to share any incentive programs that you have in place or will implement going forward for existing customers would be helpful.
Nay Soe Naing, can you repeat? I'm sorry, that wasn't getting across in terms of.
I'm sorry, apologies. I was asking if there are any incentive programs that you have implemented today or will implement going forward for the existing customers, to encourage them to move on to the subscription model.
Yes, there are many programs, such as discounts, for example, to help them to move to subscription, et cetera. Yes, this is ongoing.
Perfect. Thank you. You wouldn't be able to share a broad range of the discount levels that you're offering, would you?
No.
Understood. Thank you very much.
The next question is from Knut Woller of Baader Bank. Your line is now open.
Hello, and thank you. Three questions. The first one, a quick follow-up regarding the headcount. I mean, in H1, despite the pickup in Q2, it was still well below revenue growth. What kind of exit rates should we expect for headcount in 2022? Secondly, on the cash flow, it's ended a bit weaker than I would have expected in the second quarter. Is that reflecting a strong quarter-end business? That's the second question. Lastly, on M&A, if you alluded to that already, from a qualitative perspective, here are a couple of questions. First, do you see already now also in the private sector that the expected purchase price expectations are coming down? Secondly, what kind of acquisitions you're looking for?
Is it something like an add-on functionality, like in the past, rather smaller acquisitions, or should we also expect that you're looking for acquisitions like Bluebeam, which have been a bit larger and more transformational for the business, than the smaller ones? Thank you.
Yeah. Thank you, Knut. If we understood you correctly, your question is on the headcount, and then where we have been in first quarter and then second quarter, accelerating a little bit, hiring, and then what's the outlook? I mean, I think going back to what George asked in the first question, you know, we have our own plans currently, which we'll not disclose in this call. Of course, we'll be doing everything to just monitor the environment and carefully also manage costs. I don't think it would be prudent to give a, you know, an exit or hiring net amount here for headcount.
Similar to the, I think, quarter end question, if I understood you correctly in terms of also the cost levels and the margins and the impact, how the business was going throughout the second quarter, I think what Yves mentioned is very important, that acceleration, especially in the design segment for subscription, the portion in the business there, that wasn't a particular thing of just one month within the quarter. That was really a red line throughout the entire quarter, and that has impacted probably the quarter in average to a similar degree. Would we have not had done that, you're currently looking at a double-digit growth in the design segment there as well. Again, strategically important and positive for us to note that the subscription share was driven up.
And then on, uh-
M&A.
The M&A topic. Clearly this is still remaining the biggest part of the D&A, also of the growth of the company in addition to organic growth. When you look at the private sector, yes, we can see that valuations are somehow going down, obviously not everywhere. Some company people are still having a very high expectation. Of course, it is lower than in the past, which means that it's becoming more and more interesting for us and other strategic buyer to enter the M&A market more aggressively for the next few quarters. The type of companies that we are looking at, again, are very different. Also our strategy and what we are looking at are either to complement our solutions, so the add-on aspect.
Also, we could also potentially look at adjacent type of businesses, which could be a little bit bigger. We are looking at different sizes. Also what is important is that in our acquisition strategy, purely also for our innovation point of view, the venture aspect is very key to invest in startups, and this is also something you will see us accelerating in the coming quarters.
Thank you, guys.
Knut, just.
Yeah.
Just to add on the cash flow.
Yeah.
Sorry.
That was it. Thanks, Axel.
Yep. Wanted to go there. Not forgotten. Don't worry. Sorry. Cash flow, your question on, you know, why this turned out to be a bit lower second quarter as well as in the first half. Main reason for this really are some prepayments we had to make in regard to the U.S. tax and some changes in the legislation and really legal changes in the U.S. tax law there, which is no problem in such way that they will reverse in the coming years. It's kind of a prepayment. We would have stretched them otherwise over the next year. That's in for the moment and will rather help us than going forward. That's the main reason for the slightly lower cash flow in terms of cash conversion.
Again, also, paying out some bonuses there, for example, you know, in the first
Half that all came together. Couple of things, but main reason was the tax element.
Excellent. Thank you, guys.
The next question is from Andreas Wolf of Warburg Research. Your line is now open.
Yes. Hi, everyone. Congratulations on the quarter. A question regarding H2. It seems like your guidance, which you've maintained, has some buffer for H2, apart from the macro headwind that is obviously out there. Is there anything else that we should consider? Obviously, the Bluebeam transition subscription will be more obvious or will surface in Q4. Anything apart from that that we should be aware of? The second question is on the rise in interest rates, so this might slow down construction activity. Would you expect slower construction activity to also influence your business, or what's your view on the development and the indirect effects for your business? The third question would be on hiring.
Obviously, some tech companies in the Silicon Valley have announced to hire at a slower pace or even lay off people. Does this help you to hire staff, or is the profile different from what you need for Nemetschek? Thank you.
Thank you, Andreas. First of all, on H2, now clearly, the main aspect of why we confirm our current guidance, and we strongly believe in our current guidance, so I'm highly optimistic about our current guidance, is clearly as a Bluebeam subscription. You know, which will have some impact in Q3, but the main impact obviously will come in Q4 and beyond. Then economic headwinds, we'll see. Of course, nobody can be completely immune from a strong, economic downturn, but we strongly believe we can be much more resilient than others. This is why coming to your second questions, you know, rise of interest rates or even interest rates, impact on the construction industry. Again, look, the construction industry has three main challenges.
The first one is that 90% of projects are over time and over budget. The second is that 40% of the CO2 emission globally is coming from the construction industry. The third challenge is the fact that between 10%-20% even now of material used in a construction project are wasted, which obviously is a huge problem with all the material shortage that you have currently, and also all the material costs increase. Because of these three main challenges, there is a need for the construction industry to accelerate digitalization, which as you know, is still very, very low. They need to accelerate digitalization to be on time, to save costs. If you look at construction company, their margin average is, you know, on a project is 5%.
If suddenly they are not able to continue to manage properly their costs, and with all the price increase, et cetera, on the materials, which by the way, we have seen being a little bit more stabilized, which is material price increase recently in some markets. Still, they need to do something. Digitalization, so really streamlining the workflow, working better on collaboration is helping them to face all these challenges. They also need technology to really see on the energy savings, CO2 emission aspect. This is also thanks to the digitalization, why they can manage better all of that. When I say they, it is in the overall value chain and in the overall building life cycle, all the players from build to construct up to operate and manage are focusing on that.
When you look at what happened during the pandemic, COVID-19, I mean, clearly, we have seen an acceleration of three years of digitalization in the construction industry, which means that, you know, even if there is a strong economic downturn, I strongly believe, we strongly believe that, we will still see some nice growth of digitalization and software. Because again, as an example, I'm an architect. Well, if I do one house, or 10 houses in the month, I will still need, my 3D modeling, software coming from Nemetschek. You know, it's not depending, our business is not depending on their revenue and on the number of their projects. So there will be still demand, and some of these companies will probably even have more time to think about their digitalization strategy.
On the hiring side, well, the good news and, you know, there are multiple factors I think for it, is that, yes, Q1 was more difficult than anticipated to hire, like everybody in our software industry, but like frankly in any industry, hiring has been difficult, still difficult. Q2, it's true that we have seen better momentum. We hired quite a lot of people, and we had a nice net increase of employees in the first half. It's true that two factors, you have some of the big guys who are a little bit decelerating the hiring process. Good news, because, you know, we are hiring more or less same type of profile when you're looking for a software developer.
The other good news is that on the startup side, some people, well, there have been, as you know, a lot of, and there will still be some, cost cutting in the venture and startup aspect, and therefore some people are a bit more prudent, and they may prefer to go in a more mature business than jumping in a startup mode. I don't know if these are the two main reasons why we are able to hire better. I think we also build on a plan and a strategy combining effort between all our brands, and being more active and aggressive on our recruitment strategy and to really attract people, which is one of the number one priority within the group.
So far, it is working and we are seeing some positive results so that we are able to hire again in a positive way.
Great. Thank you.
The next question is from Martin Jungfleisch of BNP Paribas. Your line is now open.
Yes, hi. Good afternoon. Just two questions from my side, please. The first one is on the performance in Germany. Yeah, revenues, they were only up by 7% in the first half, I think or, organically probably a bit less. What has driven this, and has this slowdown mainly occurred in the second quarter? Would you expect a further weakening in the second half of this year there or, have you already seen some stabilization? The second question is on Bluebeam, the subscription transition. Can you comment a bit on pricing of the subscription offer compared to your current license offering? So essentially what, on average on a three-year basis you would expect from a new subscription customer compared to the existing, the license offering? Thank you.
On your second question, on the first quarter, 7% and then a bit more of 7% after. Yeah, it's a stable development. On Germany, yes. Your question was, I mean, we see still strong demand in the German market. I think we have seen some of our brands having very nice big double-digit growth, some of our large brands. One or a couple of others had more difficulties than expected, which is not due to the economic aspect or macro or the product, but which was more internal issues that we need to fix and we are fixing them.
Germany, frankly, in terms of markets, we see still a high demand, still positive about it. Also on the design segment, still nice growth coming up also this quarter.
Okay. Thank you.
Could you please repeat your question regarding Bluebeam? We had some bad connection. Yeah.
Yes, of course. Yeah, just on the transition, on the pricing, if you can comment a bit, what on average on a three-year basis you would expect from a new subscription customer compared to the existing license offering, if there's an indirect price increase?
Yeah, I think as we mentioned, I think last quarter, so we are planning to have breakeven in 2.5-three years, something like that, depending on which package they use.
Yeah. Thank you.
Thanks, Martin.
The next question is from Victor Cheng of Bank of America. Your line is now open.
Thank you for taking my question. Just two if I may. First of all, on design, given the segment's higher license mix, should we expect growth to be, you know, slower in H2 given the macro backdrop, or is that also why you see higher subscription transition as customers look to soften the upfront costs? How should we think about H2 growth in design? Secondly, on media segment, understandably there's been some one-off pull forward effects in China in Q1. I remember last quarter you mentioned full year is, you know, definitely below 50% growth. Just wanna double check whether that is in constant currencies and is that still your expectation of below 50% growth, given Q2 is still very strong? Thank you.
Yeah. Regarding design in H2, I mean, we do not see any downsides coming, still a strong momentum. We still see nice opportunities, when you look at the pipeline, when you look at even, you know, the last few weeks of the quarter. Very positive. Now why they are moving more to subscriptions, I think there are different reasons. Some of our customers, first of all, some of our brands in design are pushing a strategy which is to influence more subscription. There is really a push in terms of marketing, in terms of pricing-wise. We have really the strategy overall, as you know, to migrate and really to accelerate the move to subscription revenue.
Yes, of course, there are some customers where, because potentially of the economic downturn, it's easier for them, financially, to go with a subscription model than a perpetual license. To answer your second question on Maxon, so on media. As you know, beginning of the year, there has been an acceleration of perpetual license sales, because we announced in China that we will stop perpetual and move to subscription.
Now, China in Q2 was not as great as expected because, you know, as you may also know in China, due to COVID-19 there has been some lockdown of some cities such as Shanghai and others. Overall, if you look at Maxon, I think there will be still, especially on the pure ARR front, a very good growth and very good momentum. If you look then at the second half, you know, it's clearly above the 30% in constant currency.
Okay, thank you.
The next question is from Chandramouli Sriraman of Jefferies. Your line is now open.
Yeah. Afternoon, Yves, Axel. Just a couple of questions from my side. Firstly on the pace of Bluebeam transition, I just wanna clarify that by the second half of next year, all your customers will be on subscriptions. New customers are already being asked to move to subscriptions now and by the second half of next year, even existing customers will move. Just to follow up on the same thing, would you see the current macro environment as a catalyst to accelerate other solutions to subscriptions as well, or you're going to let customers decide the pace of this? Thanks.
Clearly first on Bluebeam, you're right. I mean, we are planning now by the end of Q3 to have, you know, it's full launch for all or the type of customers from the large one to the smaller one, from the direct one to the indirect one. Therefore, as we said, you know, we will give, you know, kind of 12 months to some of our large customer in particular to still have a chance to buy perpetual. That mean that it's more by the end of Q3 next year, you know, they will not have choice anymore.
That is going to be only subscription by beginning of Q4, if you want, or sometime in Q3 for some of them, and for sure in Q4 next year, so that they will have no choice and subscription will be somehow mandatory. Talking about some other brands, you know, we are currently looking at the phasing of some other brands with the move to subscription, with some acceleration of subscription. With some brands, we will clearly not say that, "Okay, we will mandate subscription," because it is also the strategy of some of our brands, in particular in design, to still keep a hybrid model with perpetual license and also subscription. But in some cases, we may want to accelerate that, and it is something that we are currently evaluating very seriously.
Thank you.
The next question is from Mohammed Moawalla of Goldman Sachs. Your line is now open.
Great. Thank you very much. Good afternoon. I had two questions. Firstly, you mentioned pockets of weakness around sort of Eastern Europe and parts of Germany. To what extent is your guidance de-risked, particularly at the lower end, for any further deterioration of macro in the second half? Do you think you can still hit the lower end of that, if some of those Western markets start to deteriorate? And then secondly, you know, the Bluebeam transition has been sort of pushed, I guess, now for several quarters. Are we at the kind of point of no return now, in Q4, that there's no further delay, and you know, you're gonna go kind of full tilt with the transition with your customers?
Similarly on design, I guess, can you help us understand relative cyclicality of the design segment, perhaps this time around versus prior cycles where obviously we've seen much deeper cyclicality? I know there's the whole digitization and some of the structural drivers, but is there something in the portfolio in terms of different price points which would make it perhaps less cyclical than the past? Thank you.
Sure. Now, first of all, to answer your question on Bluebeam, there is no delay from what we discussed earlier this year. We always say that we will launch and move to subscription in Q3, which is what we have done. We started the migration early July. It's on track. There is absolutely no delay here. We are doing it in a phased approach within Q3. By the end of Q3, the full thing. There is definitely no delay compared to the plan that we indicated earlier this year and what I communicated and we discussed in our last earnings call.
If you look at Europe and the different pockets, as I said, Germany is strong as a macro as an economy for us in terms of the business that we are seeing. We see strong momentum. The pipeline is here. We have some nice growth. It's true that there are some markets which are smaller, okay? Smaller markets, smaller countries, therefore smaller revenue potential also anyway or planned for us in Eastern Europe, which are more impacted. Are they going to be more impacted in H2 than in H1? Maybe, maybe not. I don't think that's going to be a needle mover in one way or another anyway with our current guidance. We are quite secure, I think.
Strong with the current guidance that we are announcing. On the design side, I mean, the fact that we are moving more to a recurring model, which means that we are more, we have much more visibility and are able to forecast in a much better way than in the past. It is clearly a less cyclical business than it used to be, thanks to this recurring aspect of the business and the move to subscription.
You feel that the lower end of your guidance for 2022 would capture any further sort of macro risk?
Definitely.
In the second half?
Definitely. We are highly confident in our current guidance. Very highly confident. Now, of course.
Thank you.
If there is a strong economic downturn, nobody can be immune. So far, with what we know and the current potential smaller risk that we could see in H2, we are very strong, highly strong with our guidance.
Thank you.
As there are no further questions, I hand back to the speakers.
Thank you all for listening. If you have follow-up questions, Patrick and myself are always available. Just give us a call. Otherwise, let's talk next quarter. Happy to get your question after the third quarter. Thank you very much again for listening, and have a lovely day.
Thank you, everyone.
Thank you.
Thank you. Have a nice day.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.